ASX edges closer to the all-time high – RBA holds rates in May

May 4, 2021 - 2 weeks ago
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The Australian sharemarket climbs higher for the second day on Tuesday, although the journey has been a bumpy ride after the Reserve Bank of Australia (RBA) left interest rates at a record low of 0.10%, as widely expected.

There were no surprises from the Reserve Bank of Australia today after RBA Governor Philip Lowe made it clear that the board is unlikely to hike rates until inflation and wages are boosted.

“Despite the strong recovery in economic activity, the recent CPI data confirmed that inflation pressures remain subdued in most parts of the Australian economy,” the RBA said.

“A pick-up in inflation and wages growth is expected, but it is likely to be only gradual and modest.”

The bank expects unemployment to fall from 5.6% in March to 4.5% by the end of next year and for GDP to grow 4.75% this year and 3.5% next year.

Mr Lowe reiterated that the board does not expect to raise the cash rate until 2024 at the earliest.

“It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently.

This is unlikely to be until 2024 at the earliest,” Lowe said.

The resources sectors bounced back from losses posted yesterday as Materials gained +2.21%, while Information Technology weighed on the index after plummeting -1.96%.

The ASX 200 index now stands 130 points short of its February 2020 all-time highs viewed at 7,197.20, set days before the coronavirus crash started in February last year.

At the closing bell, the benchmark S&P/ASX 200 index advanced +39.1 points, or +0.56%, to 7,067.9, while the broad All Ordinaries index climbed +36.7 points, or +0.50%, to 7,323.0.

Materials stormed back in positive territory, with BHP Group leading the titans higher after climbing +2.55%, to $48.23, while Rio Tinto rose +2.53% to $123.13, and Fortescue Metals Group added +0.8%, to $22.66.

Gold stocks were firmer, with Newcrest Mining rising +1.45% to $26.65, Northern Star Resources climbed +4.2% to $10.92, and Evolution Mining Ltd rallied +3.28% to $4.73.

The Financial sector was mixed, with Commonwealth Bank leading the “Fab Four” (banks) after climbing +0.84%, to $90.45.

Meanwhile, National Australia Bank ended up +0.07%, to $27.25, with the Westpac Banking Corp falling -0.91%, to $25.99, Australia and New Zealand Banking Group lost -0.93%, to $28.83 and Macquarie Group added +0.06% and settled at $160.28.

Supermarket giants Coles and Woolworths were among the consumer staples stocks to rise with Coles climbing +1.41%, to $16.50, and its rival Woolworths rose +0.62%, to $39.24.

E-commerce group Kogan ended higher after climbing +1.58% to $11.57, Seek added +1.85% to $31.30.

Meanwhile, JB Hi-Fi slid -0.67% lower at $45.92, while Telstra added 0.29% to $3.50, while Wesfarmers rose +0.73%, to $54.17, QBE Insurance added +0.5%, to $10.04, and Aristocrat Leisure rose +0.99%, to $37.71.

Nick Scali fell after it said it expected its full-year net profit to soar 85% to 90% as demand for sofas, dining suites, and coffee tables further soar. It dropped -2.6%, to $10.42.

Biotechnology giant CSL rose +0.1%, to $271.21, while ResMed gained +1.12%, to $25.29, Fisher & Paykel Healthcare dropped -0.24%, to $32.83, while Cochlear slid -0.28%, to $220.92 and Mesoblast advanced +0.53%, to $1.88.

In technology, Buy-now-pay-later giant Afterpay fell -2.82%, to $110.79, accounting software provider Xero tumbled -1.74%, to $137.51, Altium lost -3.18%, to $27.68, Megaport tumbled -4.2%, to $13.70, NEXTDC sank -1.47%, to $11.40, EML lost -2.09%, to $5.63 and Zip Co plummeted -1.92%, to $7.66.

As for our oil and gas producers, Woodside Petroleum climbed +1.51% to $22.86, while Oil Search ended up +2.14%, to $3.82, Santos added +2.35%, to $6.98, and Beach Energy rose +0.1.96% to $1.30.

Worley climbed +4.25%, to $11.03 after it confirmed it was on track for an improved result in the second half compared with the first half of the financial year.

Travel stocks were weaker, with Sydney Airport lost -0.49%, to $6.12, Corporate Travel Management down -1.84%, to $17.59, Flight Centre fell -4.61%, to $16.14, and Webjet fell -1.81% to $4.89.

Meanwhile, our local currency, the Australian dollar, is currently buying US$0.7706 (as of writing).

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